FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[*] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period
from_____________________________to________________________
Commission file number 1-7910
TOSCO CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 95-1865716
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
72 Cummings Point Road
Stamford, Connecticut 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203)
977-1000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
* Yes No
Registrant's Common Stock outstanding at July 31, 1995 was
37,064,909 shares
<PAGE>
TOSCO CORPORATION AND SUBSIDIARIES
Index to Financial Statements and Exhibits
Filed with the Quarterly Report of the Company on Form 10-Q
For the Three and Six Months Ended June 30, 1995
Page(s)
Part I. Financial Information
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 -9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 15
Exhibit I - Computation of Earnings Per Share 16
Part II. Other Information 17
The financial statements listed in Part I above reflect all
adjustments (consisting only of normal recurring accruals) which
are, in the opinion of Management, necessary to a
fair presentation of financial position and results of
operations. Such financial statements are presented in
accordance with the Securities and Exchange Commission's
disclosure requirements for Form 10-Q. These unaudited interim
consolidated financial statements should be read in conjunction
with the audited Consolidated Financial Statements (from
which the year-end balance sheet presented herein was derived)
and the Notes to Consolidated Financial Statements filed with
the Commission in Tosco's 1994 Annual Report
on Form 10-K.
<TABLE>
<CAPTION>
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
June 30, December 31,
ASSETS 1995 1994
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $13,064 $23,793
Short-term investments and deposits 38,535 30,829
Trade accounts receivable, less allowance
for uncollectibles of $8,714,000
(1995) and $8,392,000 (1994) 269,532 291,772
Inventories 479,665 463,637
Prepaid expenses and other current assets 39,068 43,258
Deferred income taxes 6,160 6,160
Total current assets 846,024 859,449
Property, plant and equipment, net 885,306 822,057
Deferred turnarounds and charges 121,688 94,223
Deferred income taxes 6,998 6,998
Other assets 15,645 14,479
Net assets of discontinued operations
Total assets $1,875,661 $ 1,797,206
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $471,913 $328,572
Accrued expenses and other liabilities 116,263 151,561
Total current liabilities 588,176 480,133
Revolver debt 201,000 233,000
Long-term debt 454,612 454,429
Other liabilities 14,604 14,338
Environmental cost liability 35,339 35,382
Net liabilities of discontinued operations 1,152 2,526
Deferred income taxes 1,934 1,934
Shareholders' equity:
Common shareholders' equity:
Common Stock - $.75 par value, 50,000,000
shares authorized, 39,613,950 (1995),
39,598,900 (1994) shares issued 29,714 29,702
Capital in excess of par value 638,853 640,078
Retained earnings (deficit) (20,843) (25,436)
Reductions from capital (68,880) (68,880)
Total common shareholders' equity 578,844 575,464
Total liabilities and shareholders' equity $1,875,661 $1,797,206
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Thousands of Dollars Except Per Share Data
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales $1,904,038 $1,399,761 $3,600,357 $2,895,449
Cost of sales 1,832,540 1,354,712 3,498,913 2,744,903
Selling, general and administrative expense 22,294 14,487 44,896 41,585
Interest expense 15,541 14,398 30,939 27,889
Interest income (839) (1,370) (1,738) (2,355)
1,869,536 1,382,227 3,573,010 2,812,022
Income before provision for income taxes 34,502 17,534 27,347 83,427
Provisions for income taxes 13,778 3,082 10,896 30,108
Net income 20,724 14,452 16,451 53,319
Preferred stock dividend requirements (2,516) (5,032)
Income attributable to common shareholders $20,724 $11,936 $16,451 $48,287
Income per common and common
equivalent share:
Primary $0.55 $0.37 $0.44 $1.48
Fully diluted $0.55 $0.37 $0.44 $1.42
Dividends per common share $0.16 $0.15 $0.32 $0.30
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thousands of Dollars
Six Months
Ended June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $16,451 $53,319
Adjustments to arrive at net cash provided by
operating activities:
Depreciation 29,463 25,092
Amortization of deferred items 22,417 15,145
(Increase) decrease:
Trade accounts receivable (Note 2) 22,240 (78,309)
Inventories (16,028) (88,894)
Prepaid expenses and other current assets 4,190 5,608
Increase (decrease):
Accounts payable and accrued liabilities 108,043 124,977
Other (1,934) (1,548)
Net cash provided by operating activities 184,842 55,390
Cash flows from investing activities:
Purchase of property, plant and equipment, net (92,712) (37,709)
Increase in deferred turnarounds, charges and other assets (50,082) (33,939)
Net change in short-term investments and deposits (7,706) (27,056)
Proceeds from termination of partnership 4,848
Net cash used in investing activities (150,500) (93,856)
Cash flows from financing activities:
Borrowings (repayments) under revolver, net (32,000) 7,000
Principal payments under debt agreements (4)
Dividends on Preferred and Common Stock (11,858) (14,711)
Other (1,213) ( 1,146)
Net cash used in financing activities (45,071) (8,861)
Net decrease in cash and cash equivalents (10,729) (47,327)
Cash and cash equivalents at beginning of period 23,793 55,091
Cash and cash equivalents at end of period $13,064 $7,764
The accompanying notes are an integral part of these financial
statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information with respect to the three and six months ended
June 30, 1995 and 1994 is unaudited
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of Tosco Corporation and its wholly owned
subsidiaries (Tosco), including Seminole Fertilizer Corporation
(Seminole), a discontinued operation whose principal operating
assets were sold in 1993.
All significant intercompany accounts and transactions have
been eliminated.
Nature of Business
Tosco is an independent oil refiner and marketer of
petroleum products with related distribution facilities and
domestic and international commercial activities.
Reclassifications
Certain previously reported amounts have been
reclassified to conform to classifications adopted in 1995.
Cash, Cash Equivalents, Short-term Investments and Deposits
Tosco purchased director and officer liability
insurance coverage from its wholly owned subsidiary Loil Group
Ltd. (Loil), with limits of liability coverage of $14,100,000 at
June 30, 1995 (an amount approximately
equal to the amount of cash and investments of Loil). The
assets of Loil are restricted to payment of defense costs and
claims made against the directors and officers of Tosco. At
June 30, 1995, the portfolio's carrying value
of marketable investments, considered "available for sale" in
accordance with SFAS No. 115 - "Accounting for Certain
Investments in Debt and Equity Securities", approximated fair
value.
Margin Deposits
Pursuant to the requirements of the commodity
exchanges, margin deposits based on a percentage of the value of
the futures contracts have been placed with commodity brokers.
Margin deposits are classified as short-term deposits on the
balance sheet.
Inventories
Inventories of raw materials and products are valued
at the lower of cost, determined on the last-in, first-out
(LIFO) basis, or market. The net realizable value of LIFO
inventories is measured by aggregating similar pools on a
consolidated basis.
Turnarounds
Refinery processing units are periodically shut down
for major maintenance (turnarounds). Turnaround costs are
deferred and amortized on a straight-line basis over the
expected period of benefit (the period to the next scheduled
shutdown of the unit which generally ranges from 24 to 48
months).
2. Accounts Receivable
In June 1995, as part of its ongoing program to
reduce interest costs, Tosco entered into a three year
agreement with a financial institution to sell on a revolving
basis up to $100,000,000 of an undivided percentage ownership
interest in a designated pool of accounts
receivable (Receivable Transfer Agreement). Under the
Receivable Transfer Agreement, Tosco retains substantially the
same risk of credit loss as if the receivables had not been
sold. Tosco also retains collection and
administrative responsibilities on the participating
interest sold as agent for the financial institution. At
June 30, 1995 approximately $75,000,000 of receivables
had been sold under the Receivable Transfer Agreement and the
sale is reflected as a reduction of accounts receivable.
Proceeds were used to reduce indebtedness under Tosco's
revolving credit facilities. (Note 5). The cost of the
Receivable Transfer Agreement is based on the
financial institution's cost of issuing a like amount of
commercial paper plus a margin.
3. Inventories
June 30, December 31,
1995 1994
(Thousands of Dollars)
Raw materials $227,590 $163,866
Intermediates 17,432 24,603
Finished products 231,306 272,462
Retail 3,337 2,706
$479,665 $463,637
The excess of replacement cost over the value of
inventories based upon the LIFO method was $31,036,000 and
$5,821,000 at June 30, 1995 and December 31, 1994, respectively.
<TABLE>
<CAPTION>
4. Accrued Expenses and Other Liabilities
June 30, December 31,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Accrued taxes other than taxes on income $ 72,421 $ 71,964
Accrued compensation and related benefits 14,207 11,570
Accrued interest 10,742 11,958
Income taxes receivable ( 3,078) (9,546)
Acquisition related liabilities 3,989 15,856
Other accrued costs 14,277 7,476
Restructuring costs (a) 2,922
Short term borrowings 41,500
Current installments of long-term debt 783 783
$116,263 $151,561
(a) During the first quarter of 1995, Tosco announced a restructuring program designed to reduce costs and improve operating
efficiencies in response to continuing poor refining margins. The total estimated
cost of $5,200,000, of which $2,200,000 and $3,000,000 were recorded in the first and second quarters of 1995, respectively,
was primarily for the then anticipated
severance cost of approximately 175 people at the Avon Refinery and related
support locations.
</TABLE>
5. Credit Facility and Long-Term Debt
Tosco amended its collateralized credit facility
effective April 7, 1995 (Amended Revolving Credit Facilities).
The amendment extended the maturity of the credit facility by
one year to April 1998 and reduced the cost of borrowing. Cash
borrowing under the Amended Revolving
Credit Facilities now bears interest at the option of Tosco at
one of three alternative rates (a federal funds rate, a
Eurodollar rate, or a base rate related to prime) plus an
incremental margin for each rate option. The incremental margin
is dependent on the credit rating of the First Mortgage Bonds.
<TABLE>
<CAPTION>
Utilization of Revolving Credit Facilities
June 30, December 31,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Revolving Credit Facilities
Cash borrowings $ 201,000 $ 233,000
Letters of credit 57,866 58,517
Total utilization 258,866 291,517
Availability 191,134 158,483
Total credit line $ 450,000 $ 450,000
Interest paid was $24,386,000 and $24,848,000 for the first six months of 1995 and 1994, respectively.
</TABLE>
6. Capital Stock
During the second quarter of 1995, options to purchase
205,000 shares of common stock of Tosco (Common Stock) were
granted at $32.63. Quarterly dividends of $.16 per share of
Common Stock were paid on June 30, 1995.
<TABLE>
<CAPTION>
7. Income Taxes
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Federal $ 10,678 $ 3,711 $ 8,191 $ 24,807
State 2,444 (629) 1,914 5,301
Foreign 656 791
Provision for income taxes $ 13,778 $ 3,082 $ 10,896 $ 30,108
Cash payments (refunds)
of income taxes, net $1,295 $ 8,836 ($2,451) $ 9,669
</TABLE>
8. Contingencies
Environmental exposures are difficult to assess and estimate
for numerous reasons including the complexity and differing
interpretations of governmental regulations, the lack of
reliable data, the number of potentially responsible parties and
their financial capabilities, the multiplicity of possible
solutions, the years of remedial and monitoring activity
required, and the identification of new sites. Tosco continues
to evaluate, on a quarterly basis, its liability for
environmental costs, net of liabilities transferred pursuant to
the settlement of outstanding
litigation concerning environmental issues with the predecessor
owners of the Avon Refinery. While Tosco believes that its
environmental cost accrual is adequate, should these matters be
resolved unfavorably to Tosco, they could
have a material adverse effect on its long-term consolidated
financial position and results of operations.
9. Subsequent Events
7% Notes
In early July 1995, Tosco filed a registration statement
for the issuance, from time to time, of up to $250,000,000 of
unsecured debt
securities on terms determined by market
conditions at the time of issuance. On July 12, $125,000,000 of
debt securities were issued under the registration statement
as 7% unsecured, non-callable notes due
July 15, 2000 (7% Notes) at a discount totaling $189,000. The
proceeds from the public offering, net of the discount and
costs, were used to repay indebtedness under the Amended Credit
Facilities. Interest on the 7% Notes is payable each January 15
and July 15, beginning January 15, 1996.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
Management's Discussion and Analysis should be read in
conjunction with Management's Discussion and Analysis included
in Tosco's Annual Report on Form 10-K for 1994.
Reference should also be made to the Financial Statements
included in this Form 10-Q for comparative Balance Sheet and
Statement of Income data.
Tosco's Annual Report sets forth Selected Financial Data
which, in summary form, reviewed Tosco's results of operations
and capitalization over the five-year period 1990-1994.
This Management's Discussion and Analysis updates that data.
<TABLE>
<CAPTION>
Results of Operations - Three months ended June 30, 1995
Three Months Ended June 30,
1995 1994
(thousands of dollars)
<S> <C> <C>
Sales (a) $1,904,038 1,399,761
Cost of sales 1,829,540 1,354,712
Operating contribution 74,498 45,049
Restructuring charge 3,000
Selling, general, and administrative expense 22,294 14,487
Net interest expense 14,702 13,028
Pre-tax income 34,502 17,534
Provision for income taxes 13,778 3,082
Net income $ 20,724 $ 14,452
(a) The increase in sales for the second quarter of 1995 is primarily due to the acquisition of additional retail marketing assets
and higher sales prices.
</TABLE>
<TABLE>
<CAPTION>
Refining Data Summary
Three months ended June 30, 1995 and 1994
(In thousands of barrels per day (B/D) except for refining margins)
Avon (a) Bayway (b) Ferndale Consolidated
1995 1994 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crude and other raw materials 163.5 139.3 294.4 270.0 81.5 91.3 539.4 500.6
Petroleum products produced:
Clean Products 139.2 123.6 246.0 220.2 55.0 62.6 440.2 406.4
Other finished products 21.5 13.4 54.1 53.9 23.6 27.4 99.2 94.7
Total finished products produced 160.7 137.0 300.1 274.1 78.6 90.0 539.4 501.1
Refining margin per charge
barrel (c) $ 5.84 $ 6.11 $ 3.50 $3.33 $ 4.10 $ 4.19 $ 4.30 $ 4.26
(a) Production for the second quarter of 1994 was negatively impacted by the scheduled turnaround of Avon's fluid coker.
Avon's 1994 refining margin and raw materials processed were restated to include the production costs of MTBE.
(b) Bayway's production results for the second quarter of 1995 reflect the benefit of the expanded crude distillation capacity
completed in the third quarter of 1994.
Refining margins include the results of hedges on a varying percentage of Bayway's production.
(c) As illustrated by the table, refining margins vary significantly by refinery. This variance is due to a number of reasons
including marketing conditions in the principal areas
served by the refineries, their configuration and complexity (ability to convert raw materials into clean products), and maintenance
schedules.
</TABLE>
Tosco earned $ 20.7 million, or $ .55 per fully diluted
share, on sales of $1.9 billion for the second quarter of 1995,
compared to net income of $14.5 million, or $ .37 per fully
diluted share, on sales of $1.4 billion for the second quarter
of 1994. Results of operations for the second quarter of 1995
include an after-tax restructuring charge of $1.8 million ($.05
per share) which was reallocated from the first quarter of 1995.
Tosco generated an operating contribution (income before the
restructuring charge, selling, general and administrative
expense, net interest expense, and income taxes) for the second
quarter of 1995 of $74.5 million, an increase of $29.4 million
from 1994. The increase was primarily attributable to the lack
of major scheduled turnaround maintenance at the three
refineries,
slightly higher margins and expanded retail operations.
Consolidated raw material
throughput for the second quarter of 1995 increased by 38,800
barrels per day (B/D) to 539,400 B/D and production of clean
transportation fuels, aided by expanded crude distillation
capacity at Bayway, increased by 33,800 B/D to 440,200 B/D over
the comparable 1994 period. Refining margins for the second
quarter of 1995 on a consolidated basis
increased by $.04 per barrel from the second quarter of 1994 but
varied widely by refinery. Bayway's refining margins, assisted
by strong gasoline sales at the start of the summer driving
season, increased by $ .17 per barrel while West Coast refinery
margins declined by $.27 per barrel and $.09 per barrel for Avon
and Ferndale, respectively. Retail marketing fuel margins
continued to be
strong, averaging $.09 per gallon during the second quarter of
1995 compared to $.07 for the second quarter of 1994. Retail
volumes sold also increased by 28,500 B/D to 69,000 B/D over the
second quarter of 1994 primarily because of the August and
December 1994 acquisitions of the retail marketing operations in
Northern California and Arizona from British Petroleum (BP) and
Exxon, respectively.
The increase in selling, general, and administrative
expense for the second quarter of 1995 is due to expanded retail
operations. The increase
in net interest expense for 1995 is primarily due to higher
levels of and higher interest rates on floating rate revolving
credit debt.
<TABLE>
<CAPTION>
Six Months Ended June 30,
1995 1994
(thousands of dollars)
<S> <C> <C>
Sales $ 3,600,357 $ 2,895,449
Cost of sales 3,493,713 2,744,903
Operating contribution 106,644 150,546
Restructuring charge 5,200
Selling, general, and administrative expense 44,896 41,585
Net interest expense 29,201 25,534
Pre-tax income 27,347 83,427
Provision for income taxes 10,896 30,108
Net income $ 16,451 $ 53,319
</TABLE>
<TABLE>
<CAPTION>
Refining Data Summary
Six months ended June 30, 1995 and 1994
(In thousands of B/D except for refining margins)
Avon (a) Bayway Ferndale (a) Consolidated
1995 1994 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crude and other raw materials 164.6 153.6 294.3 264.6 70.0 92.0 528.9 510.2
Petroleum products produced:
Clean Products 123.3 127.9 246.0 215.0 45.7 61.7 415.0 404.6
Other finished products 37.6 23.1 54.1 55.4 22.1 28.2 113.8 106.7
Total finished products produced 160.9 151.0 300.1 270.4 67.8 89.9 528.8 511.3
Refining margin per charge barrel $ 5.44 $ 6.81 $ 3.00 $3.55 $ 3.83 $ 4.59 $ 3.87 $ 4.72
(a) Avon's catalytic cracker, the refinery's principal gasoline production unit, and the processing units at the Ferndale Refinery
were shutdown for 55 and 33 days, respectively, in the first
quarter of 1995 for major scheduled turnaround maintenance.
</TABLE>
Tosco earned $ 16.5 million, or $.44 per fully diluted
share, on sales of $3.6 billion for the first six months of
1995, compared to $53.3 million, or $1.42 per fully diluted
share, on sales of $2.9 billion for the first six months of
1994. Results
of operations for the first half of 1995 include an after-tax
restructuring charge of $3.1 million ($.08 per share).
Tosco generated an operating contribution for the first
half of 1995 of $106.6 million, a decrease of $43.9 million from
1994. The decrease was primarily attributable to the extensive
scheduled turnaround maintenance and extremely poor refining
margins in the first quarter of 1995. The exceptionally weak
market conditions in the first quarter of 1995 resulted from the
combined impact of a
surplus of heating oil due to the mild winter on the East Coast
of the United States and poor gasoline markets due to the
industry's inability to recover the higher production costs of
reformulated
gasolines in highly competitive markets. Retail marketing fuel
margins averaged $.09 per gallon for the first half of 1995
compared to $.08 for the comparable 1994 period. Retail
volumes sold also increased by 27,000 B/D to 67,000 B/D due to
acquisitions of retail assets in Northern California and
Arizona.
The increase in selling, general, and administrative
expense for the first six months of 1995 versus the comparable
period of 1994 was due to Tosco's expanded operations partially
offset by lower provisions for incentive compensation (due to
lower levels
of income) and potential losses on trade receivables. In the
first quarter of 1994, Tosco recorded provisions of $5.3 million
for incentive
compensation and $2.9 million for potential losses on trade
receivables. The increase in net interest expense for 1995 is
primarily due to higher levels of and higher interest rates on
floating rate revolving credit debt.
Outlook
Results of operations continue to be determined by two
factors: the operating efficiency of the refineries and
refining and retail marketing margins. The second quarter of
1995 had no major turnaround activity. Significant turnaround
activity is not currently planned for the balance of 1995 and,
assuming
reasonable margins, Tosco presently expects to
operate the refineries at high production levels for the
remaining period of 1995. Tosco is not able to predict the
level or trend of refining and retail margins because of
uncertainties associated with oil
markets. To reduce Tosco's exposure to fluctuations in refining
margins, and reduce the volatility of operating results, Tosco
at June 30, 1995, has used futures contracts to lock in what it
considered to be acceptable refining margins on approximately
24% and 14% of Bayway's expected third quarter and remaining
1995 production, respectively.
Recently passed legislation lifted the ban on the export of
Alaskan North Slope (ANS) crude oil, a primary source of raw
materials for West Coast refineries, which may lead to higher
costs for ANS and other domestic crude oils which may not be
recovered in higher sales prices. The exchange agreement with
Atlantic Richfield Company (ARCO) under which ARCO delivers
50,000 B/D of ANS crude oil to the Avon Refinery in exchange for
a variable quantity of gasoline is scheduled to terminate on
December 31, 1996 unless extended at ARCO's option by
December 31, 1995. Discussions with ARCO are in progress but
the renewal of the exchange agreement, and the effects
therefrom, are uncertain.
In view of uncertain refining margins and the competitive
refining environment, Tosco implemented a restructuring
program to reduce operating costs and increase efficiencies.
Its total estimated cost of approximately $5.2 million, recorded
in the first and second quarters of 1995, was primarily for
the then anticipated severance costs of approximately 175 people
at the Avon Refinery
and related support locations. The costs of the restructuring
program are being paid in the second quarter of 1995 from
operating cash flow and will be offset by the anticipated annual
savings of approximately
$10 million. Tosco expanded its restructuring program with
the late June announcement of the consolidation of operating and
administrative functions of its West Coast operations, including
the closing
of the Concord, California administrative office. The expanded
restructuring program will be completed within one year.
Additional cost savings, together
with a more efficient organizational structure, are expected.
Tosco's expansion into retail marketing has been successful
in providing earnings in a period of poor refining margins and
Tosco continues to seek opportunities to acquire additional
retail marketing assets that allow an attractive rate of return
and complement its existing refining and retail systems.
Cash flows and liquidity
As summarized in the Statement of Cash Flows, cash
decreased by $11 million during the first six months of 1995 as
cash used in investing and financing activities of $151 million
and $45 million, respectively, exceeded cash provided by
operating activities of $185 million.
Cash provided by operating activities of $185 million was
from cash earnings from operations of $68 million (net income
plus depreciation and amortization), a decrease
in working capital of $119 million, partially reduced by a
decease from other sources of $2 million. The decrease in
working capital was primarily due to an increase in accounts
payable and the sale of accounts
receivable. See Note 2 to the June 30, 1995 Consolidated
Financial Statements.
Net cash used in investing activities totaled $151
million, primarily for capital additions and deferred turnaround
expenditures of $93 million and $50 million, respectively,
and increases in short-term
investments and deposits of $8 million. Cash used in financing
activities totaled $45
million, consisting of net repayments of cash borrowings under
its revolving credit facility of $32 million, dividends of $12
million and other payments of $1 million.
Liquidity (as measured by cash, short-term investments and
deposits and unused credit facilities) increased by $30 million
during 1995 due to an increase of $8 million in short-term
investments and deposits and $33 million in unused credit
facilities, partially offset by a decrease in cash and cash
equivalents of $11 million. At June 30, 1995, liquidity
totaled $243 million (an amount which Tosco
believes is adequate to meet its expected liquidity demands for
at least the next twelve months).
To increase financial flexibility and reduce interest
costs, Tosco amended its working capital agreement in April
1995,
entered into a Receivable Transfer Agreement in June 1995, and
issued $125 million of unsecured 7% notes in July 1995. Tosco
has registered an additional $125 million of unsecured debt
securities which may be offered to the public on terms
determined by market conditions
at the time of sale. See Notes 2, 5 and 9 to the June 30, 1995
Consolidated Financial Statements.
Capital Expenditures and Capitalization
During the first six months of 1995, Tosco spent $ 93
million on budgeted capital projects, primarily at the Avon
Refinery and retail outlets. Capital spending programs continue
to address
reformulated fuel specifications, compliance with environmental
regulations and permits, operating flexibility and reliability,
personnel/process safety, and retail expansion and
modernization.
In May 1995, Tosco announced a three-year $200 million program
to expand
retail marketing operations on the West Coast of the United
States. The expansion program will be used to develop new
retail
sites in existing markets, enhance existing retail facilities
and enter new markets through new construction, purchases and
leases of existing stations or systems and new jobber business.
Tosco expects to fund its capital expenditures from cash
provided by operations, available credit and other resources.
At June 30, 1995, total shareholders' equity was $579
million, an increase from December 31, 1994 of $3 million due
to net income of $16 million less dividend and other payments
of $13 million. Debt, including current maturities and
short-term bank borrowings, decreased by $73 million to $656
million at June 30, 1995.
<TABLE>
<CAPTION>
TOSCO CORPORATION AND SUBSIDIARIES
PART 1 - EXHIBIT I
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In Thousands Except Per Share Data
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Income $ 20,724 $ 14,452 $ 16,451 $53,319
Preferred stock dividends ( 2,516) (5,032)
Net income attributable to common shareholders
for primary income per
share computations 20,724 11,936 16,451 48,287
Addback of dividends on preferred stock
for assumed conversion 2,516 5,032
Net income attributable to common shareholders
for fully diluted income
per share computations $ 20,724 $ 14,452 $ 16,451 $53,319
Weighted average number of shares
outstanding during the period 37,060 32,263 37,055 32,263
Stock option equivalents 465 358 356 389
Shares used for computation of primary
earnings per share 37,525 32,621 37,411 32,652
Weighted average potentially dilutive
securities for the assumed conversion
of preferred stock 4,792 4,792
Weighted average common stock equivalents 37
Shares and equivalents used for computation
of fully diluted earnings per share 37,525 37,413 37,448 37,444
Earnings per share:
Primary $ 0.55 $ 0.37 $ 0.44 $ 1.48
Fully diluted $ 0.55 $ 0.37(a) $ 0.44 $ 1.42
(a) Fully diluted earnigns per share for the second quarter of 1994 did
not assume the conversion of preferred stock because the effect was
anti-dilutive.
</TABLE>
PART II. OTHER INFORMATION
Item 2. Changes in the Rights of Security Holders
In early July 1995, Tosco filed a registration statement
authorizing, from time to time, the issuance of up to an
aggregate $250,000,000 of unsecured debt securities on terms
determined by market conditions at the time of the issuance. On
July 12, 1995, Tosco issued $125,000,000 of 7% unsecured, non
callable notes due July 15,
2000 (7% Notes)under the registration statement. Interest on
the 7% Notes is payable each January 15 and July 15, beginning
January 15, 1996.
Item 4. Submission of Matters to Vote of Security Holders
On May 18, 1995, an Annual Meeting of the Stockholders was held.
The table below briefly describes the proposals and the results
of the shareholder vote.
Election of Directors
Names Votes For Withhold Authority
Jefferson F. Allen 28,271,566 77,527
Joseph B. Carr 28,191,681 157,412
Houston I. Flournoy 28,225,567 123,526
Clarence G. Frame 28,215,701 133,392
Edmund A. Hajim 28,272,244 76,849
Joseph P. Ingrassia 28,245,447 103,646
Charles Luellen 28,270,293 78,800
Thomas D. O'Malley 28,269,467 79,626
Authorization and approval Votes For Votes Against Abstain
of Amendment of the 1992
Stock Incentive Plan 19,259,539 8,753,844 335,710
Ratification and approval Votes For Votes Against Abstain
of appointment of Coopers
& Lybrand as independent
accountants 28,265,258 43,491 40,344
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
4. Form of Indenture between Tosco Corporation and The First
National Bank of Boston, As Trustee, relating to Debt Securities
(including Form of Debt Security), incorporated by reference
from Exhibit 4.1 of Tosco Corporation's Amendment No. 3 to
Registration Statement on Form S-3 as filed on June 30, 1995.
11. Computation of Earnings Per Share (see Part I, Exhibit
I).
99. Condensed Consolidating Financial Information
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
TOSCO CORPORATION
(Registrant)
Date: August 11, 1995 By: /s/ JEFFERSON F. ALLEN
(Jefferson F. Allen)
Executive Vice President
and Chief Financial Officer
By: /s/ ROBERT I. SANTO
(Robert I. Santo)
Chief Accounting Officer
Exhibit 99
Condensed Consolidating Financial Information
The following tables set forth the condensed consolidating
financial statements as of June 30, 1995 and for the six months
then ended of Tosco, Bayway and Tosco's other subsidiaries. They are
provided to meet the
reporting and informational requirements of Bayway as guarantor of the 81/4%
First Mortgage Bonds.
<TABLE>
<CAPTION>
Condensed Consolidated Balance Sheet
(Thousands of Dollars)
For the Six Months Ended June 30, 1995
Tosco Bayway Minor Subs
(Issuer) (Guarantor) (Non-guarantors) Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents $13,851 ($1,690) $ 903 $ 13,064
Short-term investments and deposits 2,381 12,954 23,200 38,535
Other current assets (a) 210,340 453,866 130,219 - 794,425
Total current assets 226,572 465,130 154,322 - 846,024
Other assets 735,962 247,234 50,807 (4,366) 1,029,637
Investment in Bayway and other subsidiaries 239,834 - - (239,834) -
Intercompany receivables 206,213 - - (206,213) -
Total assets $1,408,581 $712,364 $205,129 ($450,413) $1,875,661
Liabilities and shareholders' equity
Current liabilities $237,526 $275,353 $75,297 $588,176
Revolver and long-term debt 534,942 116,000 4,670 655,612
Other liabilities 57,269 126 (4,366) 53,029
Intercompany liabilities - 111,418 94,795 (206,213) -
Shareholders' equity 578,844 209,593 30,241 (239,834) 578,844
Total liabilities and shareholders' equity $1,408,581 $712,364 $205,129 ($450,413) $1,875,661
Condensed Consolidating Statement of Income
(Thousands of Dollars)
For the Six Months Ended June 30, 1995
<S> <C> <C> <C> <C> <C>
Sales $1,533,041 $1,724,468 $397,033 ($54,185) $3,600,357
Cost of sales 1,489,886 1,670,042 393,170 (54,185) 3,498,913
Operating contribution 43,155 54,426 3,863 - 101,444
Selling, general and administrative expense (b) 31,291 13,227 378 44,896
Interest expense, net 18,922 10,602 (323) - 29,201
Income (loss) before provision for income taxes (7,058) 30,597 3,808 - 27,347
Provision (credit) for income taxes (2,694) 12,086 1,504 - 10,896
Net income (loss) ($4,364) $18,511 $2,304 $ - $16,451
(a) Inventories are valued at the lower of LIFO cost or market value which
is measured on a consolidated basis.
(b) The condensed consolidating statement of income does not
reflect an allocation of a portion of aggregate
corporate selling, general and administrative expense of $ 8,842,000 to
Bayway and the Minor Subsidiaries. Tosco may allocate such costs in the future.
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidated Statement of Cash Flows
(Thousands of Dollars)
For the Six Months Ended June 30,
1995
Tosco Bayway Minor Subs
(Issuer) (Guarantor) (Non-guarantors) Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($4,364) $18,511 $2,304 $16,451
Depreciation and amortization, 37,190 13,629 1,061 51,880
Changes in working capital 103,063 92,413 (77,031) 118,445
Other (1,291) (73) (570) - (1,934)
Net cash provided by (used in)
operating activities 134,598 124,480 (74,236) - 184,842
Cash flows from investing activities:
Increase in long-term assets (116,887) (14,632) (11,275) (142,794)
Intercompany transfers (48,105) (37,589) 85,694 -
Intercompany dividend (297) 297 - - -
Net change in short-term investments
and deposits (911) (4,787) (2,008) - (7,706)
Net cash provided by (used in)
investing activities (166,200) (56,711) 72,411 - (150,500)
Cash flows from financing activities:
Borrowings (repayments) under revolver, net 57,000 (89,000) (32,000)
Dividends on Common Stock (11,858) (11,858)
Other (1,213) - - - (1,213)
Net cash provided by (used in)
financing activities 43,929 (89,000) - - (45,071 )
Net increase (decrease) in cash
and cash equivalents 12,327 (21,231) (1,825) (10,729)
Cash and cash equivalents at
beginning of period 1,524 19,541 2,728 - 23,793
Cash and cash equivalents
at end of period $13,851 ($1,690) $903 $ - $13,064
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 13,064
<SECURITIES> 24,899
<RECEIVABLES> 278,246
<ALLOWANCES> 8,714
<INVENTORY> 479,665
<CURRENT-ASSETS> 846,024
<PP&E> 1,236,736
<DEPRECIATION> 351,430
<TOTAL-ASSETS> 1,875,661
<CURRENT-LIABILITIES> 588,176
<BONDS> 450,000
<COMMON> 29,714
0
0
<OTHER-SE> 549,130
<TOTAL-LIABILITY-AND-EQUITY> 1,875,661
<SALES> 3,600,357
<TOTAL-REVENUES> 3,600,357
<CGS> 3,498,913
<TOTAL-COSTS> 3,498,913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,939
<INCOME-PRETAX> 27,347
<INCOME-TAX> 10,896
<INCOME-CONTINUING> 16,451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,451
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
